Fashion Retail: A State of Grace

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Today, fashion retail in India is highly competitive and there has been an avalanche of global fashion brands making an entry into the Indian marketplace. Needless to say, the increasingly aspirational Indian shopper community welcomes each new signpost and milestone on the road to organised fashion retail. Indians trace back their awareness of and appreciation for international apparel brands to the country’s Colonial times, and there is no doubt that cutting-edge fashion will always enjoy a place of honour and high potential in India.

The margins on a private label are higher for retailers, as they are able to control the sourcing and manufacturing costs of these apparels at the back-end, and marketing through their department stores on the front-end. Such retailers would include Shopper’s Stop, Pantaloons and Max, to name a few. Retailers are experiencing a year-on-year growth in sales of the private label brands.

Retail property locations in india suitable for international luxury and fashion retailers:

Typically, international luxury retailing has two key requirements to flourish in any market − brand awareness and high disposable income. These two components, currently, are present in the three key metros of India − Bangalore, Delhi and Mumbai, with their urbane, well-travelled and high income population keenly aware of global trends and extremely eager to replicate these at home. Hence the rush of luxury malls and hotel arcades that has been witnessed in these cities.

Nowhere in the country has fashion retail enjoyed as a high a standing as in Mumbai. This city has an ideal mix of corporates and business families; people are fashion conscious and enjoy being so without being obsessive. The elite in India are growing at 20 to 30 percent.

High rent has been the primary concern of luxury fashion brands in India. These have been putting a spanner in the works for their expansion. Globally the cost of real estate is typically 8-10 percent or at the maximum 15 percent  of the total cost incurred in running a store. However, in India with the rates being quoted that go as high as $35-$40 per sq.ft., the percentage of real estate cost turns out be as high as 45 percent  in some cases. Luxury fashion retail requires very high initial investment. Also, the gestation period to break even in this business is very long as far as 5-7 years. Coupled with these factors, high rent is gradually acting as a deterrent in expansion for many of these brands within the three major metros.

With the economy expanding wealth has started permeating smaller cities and towns of India as well. Other than the three major metros of India cities such as Pune, Chennai, Hyderabad, Kolkata, Ludhiana et cetera. are also on the radar for fashion retailers. Traditionally, these cities have been major centres of commerce. Hence they have a high concentration of old money families.

The factors contributing to the advent of luxury fashion brands include:

  •  A heightened awareness and aspiration among affluent Indian shoppers
  •  Increased density of newly affluent consumers

Developer capability −
Only developers with previous exposure to international standards will be able  to accommodate and adequately present international luxury brands in terms of the infrastructure and ambience, and a proven capability of catering to them, will be able to do so.

The luxury mall format is not inflexible, though the standards of floor-space and security must obviously go beyond those in a garden-variety mall. A luxury mall faces the tricky challenge of providing a synergistic atmosphere for competing, yet compatible brands targeting affluent buyers. It must provide a unique gateway to the luxury marketplace. Achieving this is a fine art, combining the most evolved concepts of human psychology, aesthetics and marketing strategy.

Location − The location must be a suitable distance away from aesthetically unappealing components such as slums. It must be able to accommodate a good approach road and ample parking facilities. For all these reasons, the location need not necessarily be central. Discerning and affluent buyers are not necessarily averse to traveling some distances to reach an exclusive shopping destination. However, it must be at an appropriate distance from similar establishments. Generally, the location should have access to a catchment with a concentration of high-income buyers.

Competition from five-star hotels − Luxury malls will not face any competition from five-star hotels as retail destinations. Today, only about 1 per cent  of tourists residing in luxury hotels actually shop there, and then only for last-minute impulse buys. They actually get better and cheaper buys at duty free shops. Other discerning shoppers would rather have more under a single roof, and at more accessible locations.

Luxury malls have to establish the necessary infrastructure that recreates the ambience and enablement of 5 star hotels, so the rentals are higher by between 30-35 percent .

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